<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Applied Materials, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
Registrant
(4) Date Filed:
January 30, 1996
<PAGE> 2
[APPLIED MATERIALS LETTERHEAD]
January 30, 1996
Dear Applied Materials Stockholder:
We cordially invite you to attend Applied Materials' 1996 Annual Meeting of
Stockholders, which will be held in the Augustine Conference Center, Applied
Materials, Inc., Building 7, 2727 Augustine Drive, Santa Clara, California on
Thursday, March 14, 1996 at 3:00 p.m. At the meeting, the stockholders will
elect ten directors and vote on a proposal to amend the Certificate of
Incorporation to increase the number of shares of Common Stock authorized to be
issued from 200,000,000 to 500,000,000.
The need for amending the Certificate of Incorporation has arisen because the
100% stock dividend distributed in October depleted the pool of authorized but
unissued shares of Common Stock by approximately 90,000,000 shares. Currently,
approximately 180,000,000 shares are outstanding and approximately 28,000,000
shares are reserved for issuance under the Company's various employee benefit
plans. The approximately 208,000,000 shares outstanding or reserved for
issuance therefore exceeds the 200,000,000 shares currently authorized by the
Company's Certificate of Incorporation. In addition, the Board of Directors
considers it advisable to have the ability to issue shares in the future for
additional stock dividends (if any), public offerings (if any) or other
corporate purposes. If the proposed amendment is approved, the resulting number
of authorized, unissued and unreserved shares would, for example, permit the
Board of Directors to declare an additional 100% stock dividend without another
amendment to the Certificate of Incorporation. Although no such action is
currently being contemplated, the Board of Directors believes such flexibility
to be in the best interest of the Company and its stockholders.
I urge you to review the proxy materials carefully, to vote FOR the director
nominees and to vote FOR the proposal to authorize additional shares.
Sincerely,
/s/ James C. Morgan
- ---------------------
James C. Morgan
<PAGE> 3
APPLIED MATERIALS, INC.
3050 BOWERS AVENUE
SANTA CLARA, CALIFORNIA 95054
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MARCH 14, 1996
3:00 P.M.
To the Stockholders:
The Annual Meeting of Stockholders of Applied Materials, Inc. will be held
in the Augustine Conference Center, Applied Materials, Inc., Building 7, 2727
Augustine Drive, Santa Clara, California on Thursday, March 14, 1996 at 3:00
p.m. for the following reasons:
1. To elect ten directors to serve for a one-year term and until their
successors have been elected.
2. To approve the amendment of the Company's Certificate of Incorporation
to increase the number of shares of Common Stock authorized for issuance
thereunder to 500,000,000.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only stockholders of record at the close of business on Friday, January 19,
1996 are entitled to notice of and to vote at the meeting and any adjournment or
postponement thereof.
By Order of the Board of Directors
DONALD A. SLICHTER
Secretary
Santa Clara, California
January 30, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY
AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
<PAGE> 4
APPLIED MATERIALS, INC.
3050 BOWERS AVENUE
SANTA CLARA, CALIFORNIA 95054
PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Directors of
Applied Materials, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders of the Company to be held at 3:00 p.m. on March
14, 1996, and at any adjournment or postponement thereof (the "Annual Meeting"
or "Meeting"), for the reasons set forth in the accompanying Notice of Annual
Meeting of Stockholders. Only stockholders of record at the close of business on
January 19, 1996 are entitled to notice of and to vote at the Annual Meeting. On
that date, the Company had outstanding 179,220,532 shares of Common Stock.
Holders of Common Stock are entitled to one vote for each share held. All
information contained herein with respect to numbers and prices of shares gives
effect to a two-for-one stock split in the form of a 100% stock dividend
distributed October 12, 1995.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the ten directors proposed by the Board unless the authority to vote for the
election of directors (or for any one or more nominees) is withheld and, if no
contrary instructions are given, the proxy will be voted FOR the approval of the
amendment of the Company's Certificate of Incorporation. Any stockholder signing
a proxy in the form accompanying this Proxy Statement has the power to revoke it
prior to or at the Meeting. A proxy may be revoked by a writing delivered to the
Secretary of the Company stating that the proxy is revoked, by a subsequent
proxy signed by the person who signed the earlier proxy or by attendance at the
Meeting and voting in person. Votes will be tabulated by the inspector of
elections of the Meeting and results will be announced by the inspector of
elections at the conclusion of the Meeting.
A majority of the shares entitled to vote, represented in person or by
proxy, constitutes a quorum. If a quorum is present, (i) a plurality vote of the
shares present, in person or by proxy, at the Meeting and entitled to vote is
required for the election of directors, and (ii) the affirmative vote of the
majority of the shares outstanding is required for approval of the amendment of
the Company's Certificate of Incorporation. Abstentions are considered shares
present and entitled to vote, and therefore have the same legal effect as a vote
against a matter presented at the Meeting. Any shares held in street name for
which the broker or nominee receives no instructions from the beneficial owner,
and as to which such broker or nominee does not have discretionary voting
authority under applicable New York Stock Exchange rules, will be considered as
shares not entitled to vote and will therefore not be considered in the
tabulation of the votes.
The expense of soliciting proxies in the enclosed form will be paid by the
Company. Following the original mailing of the proxies and soliciting materials,
employees of the Company may solicit proxies by mail, telephone, facsimile
transmission and personal interviews. The Company will request brokers,
custodians, nominees and other record holders to forward copies of the proxies
and soliciting materials to persons for whom they hold shares of the Company's
Common Stock and to request authority for the exercise of proxies; in such
cases, the Company will reimburse such holders for their reasonable expenses.
Proxies will also be solicited on behalf of management by the firm of Skinner &
Co., whose fee ($3,500) and expenses (estimated to be $6,000) will be borne by
the Company.
This Proxy Statement was first mailed to stockholders on or about January
30, 1996.
<PAGE> 5
ITEM 1 -- ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting of Stockholders, a Board of ten directors will be
elected, each to hold office until his successor is elected and qualified, or
until his death, resignation or removal. Shares represented by the accompanying
proxy will be voted for the election of the ten nominees recommended by the
Board of Directors, who are named in the following table, unless the proxy is
marked in such a manner as to withhold authority so to vote. Directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the Meeting and entitled to vote on the election of
directors. All of the nominees were elected directors by a vote of the
stockholders at the last Annual Meeting of Stockholders which was held on March
14, 1995. The Company has no reason to believe that the nominees for election
will not be available to serve their prescribed terms. However, if any nominee
for any reason is unable to serve or will not serve, the proxy may be voted for
such substitute nominee as the persons appointed in the proxy may in their
discretion determine.
The following table sets forth certain information concerning the nominees
which is based on data furnished by them:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- --------------------------------- --- ---------------------------------------------- --------
<S> <C> <C> <C>
James C. Morgan.................. 57 Chairman of the Board and Chief Executive 1977
Officer of the Company
James W. Bagley.................. 57 Vice-Chairman of the Board of the Company 1987
Dan Maydan....................... 60 President of the Company and Co-Chairman of 1992
Applied Komatsu Technology, Inc.
Michael H. Armacost*............. 58 President of The Brookings Institution 1993
Herbert M. Dwight, Jr.**......... 65 President, Chairman and Chief Executive 1981
Officer of Optical Coating Laboratory, Inc.
George B. Farnsworth**........... 72 Former Senior Vice President and Group 1974
Executive, Aerospace Business Group, of
General Electric Co.
Philip V. Gerdine*............... 56 Executive Director (Overseas Acquisitions) of 1976
Siemens AG
Tsuyoshi Kawanishi............... 66 Senior Adviser to Toshiba Corporation 1994
Paul R. Low*..................... 62 Chief Executive Officer of P.R.L. Associates 1992
Alfred J. Stein**................ 63 Chairman and Chief Executive Officer of VLSI 1981
Technology, Inc.
</TABLE>
- ---------------
* Member of Audit Committee
** Member of Stock Option and Compensation Committee
There is no family relationship between any of the foregoing nominees or
between any of such nominees and any of the Company's executive officers. The
Company's executive officers serve at the discretion of the Board of Directors.
James C. Morgan has been Chairman of the Board of the Company since 1987
and Chief Executive Officer of the Company since February 1977.
James W. Bagley has been Vice-Chairman of the Board of the Company since
December 1993. From December 1987 to December 1993, he was President of the
Company. From December 1987 through October 1995, he was Chief Operating Officer
of the Company. Mr. Bagley is a director of Kulicke and Soffa Industries, Inc.
and Tencor Instruments.
Dan Maydan has been President of the Company since December 1993 and a
Chairman of Applied Komatsu Technology, Inc. (formerly Applied Display
Technology, Inc.) since December 1991. From 1990 to
2
<PAGE> 6
December 1993, he was Executive Vice President of the Company. During 1989 and
1990, Dr. Maydan was a Group Vice President of the Company. Dr. Maydan is a
director of Opal, Inc.
Michael H. Armacost has been President of The Brookings Institution, a
nonpartisan public policy research organization, since October 1995. From
September 1993 through September 1995, he was a Distinguished Senior Fellow and
Visiting Professor at the Asia/Pacific Research Center, Stanford University.
From 1989 to 1993, he was the U.S. Ambassador to Japan. Mr. Armacost is a
director of TRW, Inc. and AFLAC Incorporated.
Herbert M. Dwight, Jr. has been President, Chairman and Chief Executive
Officer of Optical Coating Laboratory, Inc., a manufacturer of optical thin
films and components, since August 1991. From 1988 through 1991, Mr. Dwight was
President and Chief Executive Officer of Superconductor Technologies, Inc., a
high temperature superconductor research and development company. Mr. Dwight is
a director of Applied Magnetics Corporation and Trans Ocean Ltd.
George B. Farnsworth has been retired since January 1986. From September
1981 through January 1986, he was Senior Vice President and Group Executive,
Aerospace Business Group, of General Electric Co.
Philip V. Gerdine has been Executive Director (Overseas Acquisitions) of
Siemens AG, Munich, Germany, a manufacturer of electrical and electronic
products, since October 1990.
Tsuyoshi Kawanishi has been Senior Adviser to Toshiba Corporation, a
manufacturer of electrical and electronic products, since June 1994. From June
1990 to June 1994, he was Senior Executive Vice President and a member of the
Board of Directors of Toshiba Corporation.
Paul R. Low has been Chief Executive Officer of P.R.L. Associates, a
consulting firm, since July 1992. From July 1990 to July 1992, Dr. Low was a
Vice President, and General Manager of Technical Products, of International
Business Machines Corporation. Dr. Low is a director of Network Computing
Devices, Inc., Number Nine Visual Technology Corporation, Solectron Corporation
and Veeco Instruments Inc.
Alfred J. Stein has been Chairman and Chief Executive Officer of VLSI
Technology, Inc., a manufacturer of semiconductor devices, since March 1982. Mr.
Stein is a director of Tandy Corporation.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met six times during fiscal 1995. Standing
committees of the Board include an Audit Committee, which met three times during
such fiscal year, and a Stock Option and Compensation Committee, which met seven
times during such fiscal year. There is no nominating committee. However,
potential nominees are interviewed by outside directors, who submit their
recommendations to the Board.
The Audit Committee is comprised of Messrs. Gerdine (Chairman), Low and
Armacost. Messrs. Farnsworth, Kawanishi and Stein are alternate members. All
members and alternate members are non-employee directors. Pursuant to the Audit
Committee Charter, the Committee addresses on a regular basis matters which
include, among other things, (1) making recommendations to the Board of
Directors regarding engagement of independent auditors, (2) reviewing with
Company financial management the plans for and results of the independent audit
engagement, (3) reviewing the adequacy of the Company's system of internal
accounting controls, (4) monitoring the Company's internal audit program to
assure that areas of potential risk are adequately covered, and (5) reviewing
legal and regulatory matters that may have a material impact on the Company's
financial statements.
The Stock Option and Compensation Committee is comprised of Messrs. Dwight
(Chairman), Farnsworth and Stein. Messrs. Armacost, Gerdine and Low are
alternate members. All members and alternate members are non-employee directors.
The Committee's primary functions are to determine remuneration policies
applicable to the Company's executive officers and to determine the bases of the
compensation of the Chief Executive Officer, including the factors and criteria
on which such compensation is to be based. The Committee also administers the
Company's 1995 Equity Incentive Plan and Senior Executive Bonus Plan.
3
<PAGE> 7
Except as described below, no incumbent director during fiscal 1995
attended fewer than seventy-five percent (75%) of the aggregate of (1) the total
number of meetings of the Board of Directors (held during the period for which
he has been a director) and (2) the total number of meetings held by all
committees of the Board on which he served (during the periods that he served).
Michael H. Armacost attended seventy-one percent (71%) of the aggregate of such
meetings.
COMPENSATION OF DIRECTORS
Directors who are officers of the Company do not receive any additional
compensation for their services as a director. Directors who are not officers of
the Company each receive a quarterly retainer of $3,000, a fee of $2,000 for
each Board meeting attended and a fee of $500 for each committee meeting
attended if the committee meets on a day other than the day the Board meets. Mr.
Kawanishi receives an additional $1,200 for each Board meeting. Directors are
reimbursed for out-of-pocket costs incurred in connection with attending
meetings, and directors who are not residents of California are reimbursed for
the costs of preparing California tax returns. Mr. Kawanishi is also reimbursed
for the costs of preparing a U.S. federal tax return.
Directors who are not officers of the Company participate in one
compensation plan, the 1995 Equity Incentive Plan (the "1995 Plan"), which was
approved by the Company's stockholders at the 1995 Annual Meeting of
Stockholders. Under the 1995 Plan, options to purchase 20,000 shares of the
Company's Common Stock are automatically granted to each non-employee director
on the date such director is for the first time elected or appointed to the
Board of Directors. Thereafter, each such director is automatically granted
options to purchase 6,000 shares on the last business day of each fiscal year,
provided that such automatic option grants are made only if the director was on
the Board of Directors for the entire fiscal year then ending (including the
last business day of the fiscal year) and was not an employee of the Company or
any affiliate for any part of the fiscal year then ending. The exercise price
for all options granted under the 1995 Plan is 100% of the fair market value of
the shares on the grant date and all options become exercisable over a four-year
period. The options expire no later than five years after the date of grant (up
to six years in the event of the director's death).
4
<PAGE> 8
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains certain information regarding beneficial
ownership of the Company's Common Stock as of November 1, 1995 by (i) each
person which is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) the Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers (the five officers shall be referred to as the "Named
Executive Officers"), and (iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
----------------------
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT
---------------------------------------------------------------- ---------- -------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS:
FMR Corp.
82 Devonshire St.
Boston, MA 02109.............................................. 16,363,586(1) 9.13%
Investors Research Corporation
4500 Main Street
Kansas City, MO 64141......................................... 10,560,000(2) 5.89%
NON-EMPLOYEE DIRECTORS:
Michael H. Armacost............................................. 14,000(3) *
Herbert M. Dwight, Jr........................................... 131,492(4) *
George B. Farnsworth............................................ 159,000(5) *
Philip V. Gerdine............................................... 81,000(6) *
Tsuyoshi Kawanishi.............................................. 12,000(7) *
Paul R. Low..................................................... 21,000(8) *
Alfred J. Stein................................................. 45,000(9) *
NAMED EXECUTIVE OFFICERS:
James C. Morgan................................................. 695,211 *
James W. Bagley................................................. 301,962(10) *
Dan Maydan...................................................... 253,532 *
Sasson Somekh................................................... 423,052(11) *
David N.K. Wang................................................. 316,571(12) *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (14 PERSONS).... 2,604,060(13) 1.45%
</TABLE>
- ---------------
* Less than 1%
(1) This number includes 15,780,626 shares beneficially owned by Fidelity
Management & Research Company, as a result of its serving as investment
advisor to various investment companies registered under Section 8 of the
Investment Company Act of 1940 and to certain other funds which are
generally offered to limited groups of investors; 582,960 shares
beneficially owned by Fidelity Management Trust Company, as a result of its
serving as trustee or managing agent for various private investment
accounts (primarily employee benefit plans) and also serving as investment
advisor to certain other funds which are generally offered to limited
groups of investors. FMR Corp. has sole voting power with respect to
266,640 shares and sole dispositive power with respect to 16,363,586
shares.
(2) Twentieth Century Investors, Inc. ("TCI") is a registered investment
company. Its investment advisor is Investors Research Corporation ("IRC"),
an investment advisor registered under Section 203 of the Investment
Advisors Act of 1940. IRC is a wholly-owned subsidiary of Twentieth Century
Companies, Inc. ("TCC"). Mr. James E. Stowers, Jr. controls TCC by virtue
of his ownership of approximately 60% of the voting stock of TCC. As a
result of its status as investment advisor to TCI, IRC may be deemed to be
the beneficial owner with the sole authority to dispose of and vote the
10,560,000 shares of the Company owned by TCI. TCC, as a result of its
control of IRC, and Mr. Stowers, as a result of his control of TCC, may
also be deemed to beneficially own all such shares beneficially owned by
TCI. Mr. Stowers, TCC and IRC all disclaim beneficial ownership of the
shares of the Company held by TCC.
5
<PAGE> 9
(3) Includes options to purchase 9,800 shares of Common Stock exercisable by
Mr. Armacost within 60 days of November 1, 1995.
(4) Includes options to purchase 51,000 shares of Common Stock exercisable by
Mr. Dwight within 60 days of November 1, 1995.
(5) Includes options to purchase 51,000 shares of Common Stock exercisable by
Mr. Farnsworth within 60 days of November 1, 1995.
(6) Includes options to purchase 51,000 shares of Common Stock exercisable by
Dr. Gerdine within 60 days of November 1, 1995.
(7) Includes options to purchase 12,000 shares of Common Stock exercisable by
Mr. Kawanishi within 60 days of November 1, 1995.
(8) Includes options to purchase 21,000 shares of Common Stock exercisable by
Dr. Low within 60 days of November 1, 1995.
(9) Includes options to purchase 45,000 shares of Common Stock exercisable by
Mr. Stein within 60 days of November 1, 1995.
(10) Includes options to purchase 160,000 shares of Common Stock exercisable by
Mr. Bagley within 60 days of November 1, 1995.
(11) Includes options to purchase 80,000 shares of Common Stock exercisable by
Dr. Somekh within 60 days of November 1, 1995.
(12) Includes options to purchase 181,150 shares of Common Stock exercisable by
Dr. Wang within 60 days of November 1, 1995.
(13) Includes options to purchase 765,950 shares of Common Stock exercisable by
directors and executive officers within 60 days of November 1, 1995.
EXECUTIVE COMPENSATION
The following table contains information concerning compensation paid to
the Named Executive Officers for services rendered to the Company and its
subsidiaries in all capacities during the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------- ---------------------- PAYOUTS
OTHER RESTRICTED SECURITIES ------- ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION(1) AWARDS OPTIONS PAYOUTS COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ----------------------------- ------ -------- ---------- --------------- ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James C. Morgan.............. 1995 $546,033 $1,141,793 $ 0 $0 144,000 $ 0 $11,637
Chairman of the Board and 1994 520,309 763,000 0 0 288,000 0 6,930
Chief Executive Officer 1993 485,000 388,000 636,572 0 0 0 4,497
James W. Bagley.............. 1995 439,160 918,256 0 0 116,000 0 11,398
Vice-Chairman of 1994 418,448 613,000 0 0 232,000 0 7,392
the Board 1993 390,000 312,000 0 0 0 0 4,497
Dan Maydan................... 1995 377,308 788,955 0 0 100,000 0 12,084
President of the Company 1994 359,520 527,000 0 0 200,000 0 6,930
and Co-Chairman of 1993 335,000 268,000 0 0 0 0 4,497
Applied Komatsu
Technology, Inc.
Sasson Somekh................ 1995 272,308 464,063 0 0 56,000 0 4,009
Senior Vice President, 1994 239,520 251,000 0 0 112,000 0 3,465
Worldwide Products 1993 214,884 206,400 0 0 0 0 4,497
Operations
David N.K. Wang.............. 1995 272,308 464,063 0 0 56,000 0 4,009
Senior Vice President, 1994 239,520 251,000 0 0 112,000 0 3,465
Worldwide Business 1993 214,884 225,800 0 0 0 0 4,497
Operations
</TABLE>
- ---------------
(1) Represents payments made to Mr. Morgan under the Supplemental Income Plan,
which provides supplemental income and death and disability benefits to
certain current and former executives designated by the Stock Option and
Compensation Committee in 1981. In fiscal 1993, the Committee
6
<PAGE> 10
elected to pay, and the Company paid, to Mr. Morgan a lump sum equal to the
discounted present value of all future payments that would have been paid to
him under the Plan. The lump sum was paid in lieu of such future payments.
(2) Amounts consist of matching contributions made by the Company under the
Employee Savings and Retirement Plan, a "401(k)" plan providing for
broad-based employee participation.
The following table contains information concerning the grant of stock
options to the Named Executive Officers during fiscal 1995 under the Company's
1995 Equity Incentive Plan:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS (1) VALUE
----------------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF
SECURITIES % OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS APPRECIATION
OPTIONS GRANTED TO FOR OPTION TERM
GRANTED EMPLOYEES IN EXERCISE EXPIRATION -------------------------
NAME (#) FISCAL YEAR PRICE ($/SH) DATE 5% 10%
- --------------------------------- ---------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James C. Morgan.................. 144,000 2.56% $21.00 12/14/00 $1,028,449 $2,333,200
James W. Bagley.................. 116,000 2.06% 21.00 12/14/00 828,473 1,879,523
Dan Maydan....................... 100,000 1.78% 21.00 12/14/00 714,201 1,620,278
Sasson Somekh.................... 56,000 0.99% 21.00 12/14/00 399,952 907,356
David N.K. Wang.................. 56,000 0.99% 21.00 12/14/00 399,952 907,356
</TABLE>
- ---------------
(1) The options in this table were granted in December 1994 and have an exercise
price equal to the fair market value of the Company's Common Stock on the
date of grant. For each grant, 100% of the options become exercisable on
July 15, 1998.
The Company has not in the past granted stock appreciation rights.
The following table contains information concerning (i) the exercise of
options by the Named Executive Officers during fiscal 1995 and (ii) unexercised
options held by the Named Executive Officers as of the end of fiscal 1995:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James C. Morgan......... 200,000 $10,631,250 0 432,000 $ 0 $13,032,000
James W. Bagley......... 0 0 160,000 348,000 7,285,000 10,498,000
Dan Maydan.............. 192,000 10,351,051 0 300,000 0 9,050,000
Sasson Somekh........... 0 0 80,000 168,000 3,642,500 5,068,000
David N.K. Wang......... 98,850 3,012,723 181,150 168,000 8,221,877 5,068,000
</TABLE>
7
<PAGE> 11
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding any statement to the contrary in any of the Company's
previous or future filings with the Securities and Exchange Commission, this
Report shall not be incorporated by reference into any such filings.
Compensation Philosophy. The Stock Option and Compensation Committee (the
"Committee") has two principal objectives in determining executive compensation
policies: (1) to attract, reward and retain key executive talent, and (2) to
motivate executive officers to perform to the best of their abilities and to
achieve short-term and long-term corporate objectives that will contribute to
the overall goal of enhancing stockholder value. In furtherance of these
objectives, the Committee has adopted the following overriding policies:
- The Company will compensate competitively with the practices of other
leading companies in related fields;
- Performance at the corporate, business unit and individual executive
officer level will determine a significant portion of compensation;
- The attainment of realizable but challenging objectives will determine
performance-based compensation; and
- The Company will encourage executive officers to hold substantial,
long-term equity stakes in the Company so that the interests of executive
officers will coincide with the interests of stockholders -- accordingly,
stock or stock options will constitute a significant portion of
compensation.
The Committee's specific executive compensation policies discussed below are
designed to achieve the Committee's objectives through the implementation of the
foregoing policies. In the following discussion, terms such as "generally,"
"typically" or "approximately" indicate that, while the Committee's analysis is
based primarily on quantitative factors, in years with unusually strong or weak
financial results the Committee complements its quantitative analysis with a
subjective analysis which takes into account efforts expended and
non-quantifiable results achieved by the executive. The Committee's compensation
decisions in fiscal 1995 reflected the fact that the Company achieved strong
results in all geographic markets and across all product lines.
Elements of Executive Compensation. The elements of the Company's
compensation of executive officers are: (1) annual cash compensation in the form
of base salary and incentive bonuses, (2) long-term incentive compensation in
the form of stock options granted under the Company's 1995 Equity Incentive Plan
and (3) other compensation and employee benefits generally available to all
employees of the Company, such as health insurance and employer matching
contributions under the Company's Employee Savings and Retirement Plan, a
"401(k)" plan.
Total Annual Compensation. Each executive officer's target total annual
compensation (i.e. salary plus bonus) is determined after a review of
independent survey data regarding similarly situated executives at a group of
approximately twenty companies. To construct the survey group, the Company chose
companies which are in the electronics industry and either (1) have revenues
comparable to the Company's revenues or (2) compete with the Company for
executive talent irrespective of revenue. Companies are included in the latter
group if their executives have skills and expertise similar to the skills and
expertise the Company requires of its executives. The survey group is not
identical to the group of companies which comprise the Hambrecht & Quist
Semiconductors Index used in the Performance Graph, because it was constructed
using criteria different from the criteria used by Hambrecht & Quist. For each
executive officer, the Company seeks to establish a total target annual
compensation level that is at or close to the median of compensation paid to
similarly situated executives at the companies surveyed. This policy serves the
Company's objectives of attracting, rewarding and retaining key executive
talent.
Bonuses. The Committee's process for determining annual bonuses is
designed to motivate the Company's executive officers to perform to the best of
their abilities and to enhance stockholder value through the achievement of
corporate objectives. Consequently, the target bonus for an executive is related
to his or her potential impact on corporate results, while the percentage of the
target bonus received is determined with reference to performance-related
parameters.
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<PAGE> 12
The percentages of total target annual compensation allocated to salary and
to bonus differ depending on whether the officer is a business unit executive or
a staff executive. Given that business unit executives have more control over
the performance of their business unit than staff executives have over the
multiple business units they support, the target annual compensation of business
unit executives has a higher bonus component than the target compensation of
staff executives. Generally, target bonuses for business unit executives are on
the order of 60-75% of annual salary, while target bonuses for staff executives
are on the order of 40-50% of annual salary.
The percentage of target bonus that a business unit executive (other than
Mr. Morgan, Mr. Bagley and Dr. Maydan) receives depends on performance in three
categories: profitability, market share growth and customer satisfaction. The
weighting of the three categories differs among business units depending on the
maturity of the unit. Within each category are several parameters which are
weighted roughly equally. For example, if there are three parameters in the
customer satisfaction category, the weightings within such category might be
30%, 30%, and 40%. The parameters in the profitability category consist of
business unit earnings per share and business unit return on assets.
The percentage of target bonus that a staff executive receives is a
function of both corporate earnings per share performance and the performance of
the individual and his or her business unit measured against three to five
specific management-by-objective ("MBO") goals. These MBOs prescribe targeted
achievements relating to the executive's and his or her unit's support of the
Company's business units. Typically, the earnings per share parameter and the
MBO parameter are of roughly equal weight. Within the MBO parameter, the
specific goals are given different weights depending upon the individual.
Examples of typical MBO goals might include controlling spending to budget,
implementation of quality improvement processes, development of employees,
return on invested corporate funds and internal customer satisfaction.
For business unit and staff executive officers, the actual targets for all
parameters are set from year to year at levels that take into account general
business conditions and Company strategies for the year. The Committee approves
(1) the specific performance targets for Mr. Morgan, Mr. Bagley and Dr. Maydan
and (2) the philosophy behind the determination of the performance targets for
the other executive officers. At the end of the fiscal year, the Committee
determines, after discussions with Company management, whether each executive
officer has met, exceeded or fallen below these targets.
Bonuses paid to Mr. Morgan, Mr. Bagley and Dr. Maydan for fiscal 1995 were
determined pursuant to the Company's Senior Executive Bonus Plan (the "Bonus
Plan"). Bonuses under the Bonus Plan are paid only for the achievement of
performance goals that have been set in advance by the Committee. Under the
Bonus Plan, the performance goals applicable to an eligible executive for any
fiscal year require a targeted level of achievement using one or more of the
following measures: (1) annual revenue, (2) controllable profits, (3) customer
satisfaction MBOs, (4) earnings per share, (5) individual MBOs, (6) net income,
(7) new orders, (8) pro forma net income, (9) return on designated assets, and
(10) return on sales. Each of these measures is defined in the Bonus Plan. For
fiscal 1995, the performance goal applicable to Mr. Morgan, Mr. Bagley and Dr.
Maydan combined two equally weighted factors: annual revenue growth and return
on sales (i.e. net profit as a percentage of sales).
Stock Options. The Committee believes that the use of stock options as
long-term compensation serves to motivate executive officers to maximize
stockholder value and to remain in the Company's employ. The number of options
granted to each executive is determined by the Committee, in its discretion. In
making its determination, the Committee considers the executive's position at
the Company, his or her individual performance, the number of options held by
the executive (if any) and other factors, including an analysis of the estimated
amount potentially realizable from the options. This analysis takes into
account: (1) a target compensation amount equal to a specified percentage of
salary earned in the year of grant, (2) an assumed rate of appreciation in the
Company stock price, and (3) the number of options which, given the assumed
appreciation rate, would enable the executive to receive (net of the exercise
price) the target amount upon the exercise of the options on the first date that
all the options are exercisable.
Compensation of Chief Executive Officer. The Committee applies the
foregoing principles and policies in determining the compensation of Mr. Morgan,
the Company's Chief Executive Officer.
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<PAGE> 13
During fiscal 1995, Mr. Morgan received a salary of $546,033. In addition,
as described above, Mr. Morgan was eligible to receive a bonus under the Bonus
Plan. The Committee believes that Mr. Morgan, as Chief Executive Officer,
significantly and directly influences the Company's overall performance.
Accordingly, the Committee set Mr. Morgan's fiscal 1995 target bonus at 75% of
his annual salary. The actual bonus payable to Mr. Morgan was determined in
accordance with a formula set by the Committee prior to fiscal 1995, pursuant to
which (1) the Company's fiscal 1995 revenue growth and return on sales are
compared to pre-established performance goals based on such measures and (2) Mr.
Morgan's actual bonus, relative to his target bonus, is increased or decreased
according to the extent to which the Company exceeded or fell short of such
performance goals. Actual performance for fiscal 1995 significantly exceeded the
performance goals. Accordingly, Mr. Morgan was paid a cash bonus of $1,141,793,
which equals 209% of his fiscal 1995 salary.
Tax Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code limits the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers. The Company generally may
deduct compensation paid to such an officer only if the compensation does not
exceed $1 million during any fiscal year or is "performance-based" as defined in
section 162(m). The Committee's current policy is to seek a tax deduction for
all of the Company's executive compensation, to the extent consistent with the
best interests of the Company. To this end, the Company adopted the 1995 Equity
Incentive Plan and the Bonus Plan with the intent that compensation paid under
those Plans could be "performance-based" and thus fully tax deductible to the
Company.
Herbert M. Dwight, Jr.
George B. Farnsworth
Alfred J. Stein
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<PAGE> 14
COMPANY STOCK PERFORMANCE
The following graph shows a five-year comparison of cumulative total return
for the Company's stock, the Standard & Poor's 500 Composite Index and the
Hambrecht & Quist Semiconductors Index, which is a published industry index. The
Hambrecht & Quist Semiconductors Index contains approximately 21 companies in
the semiconductor and semiconductor equipment industries. Notwithstanding any
statement to the contrary in any of the Company's previous or future filings
with the Securities and Exchange Commission, the graph shall not be incorporated
by reference into any such filings.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG APPLIED MATERIALS, THE S&P 500 INDEX
AND THE HAMBRECHT & QUIST SEMICONDUCTORS INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD APPLIED H&Q SEMI-
(FISCAL YEAR COVERED) MATERIALS S&P 500 CONDUCTORS
<S> <C> <C> <C>
10/90 100 100 100
10/91 139 133 147
10/92 337 147 215
10/93 720 169 373
10/94 1,189 175 475
10/95 2,291 222 836
</TABLE>
* $100 INVESTED ON 10/31/89 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. PRICES AS OF LAST TRADING DAY IN OCTOBER.
11
<PAGE> 15
EMPLOYMENT CONTRACT
On August 15, 1995, the Company entered into an employment agreement with
James W. Bagley, its Vice Chairman and Chief Operating Officer. Pursuant to the
terms of the agreement, Mr. Bagley agreed to continue to serve as Chief
Operating Officer through the end of fiscal 1995, and to serve as advisor to the
Board and its Chairman on business, management and performance issues through
July 31, 1996. Mr. Bagley's salary is set at his fiscal 1995 level and bonuses
payable to Mr. Bagley for fiscal 1995 and 1996 will be calculated using the same
formula and parameters as pertain to the other members of the Office of the
Chief Executive Officer (i.e., Messrs. Morgan and Maydan). For the term of the
employment agreement, the Board of Directors has agreed to nominate Mr. Bagley
for election to the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1995, Herbert M. Dwight, Jr., George B. Farnsworth, and
Alfred J. Stein served as members of the Stock Option and Compensation
Committee. None of the Stock Option and Compensation Committee members or Named
Executive Officers have any relationships which must be disclosed under this
caption.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and holders of more than 10% of the Company's
Common Stock, to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Such officers, directors and 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Except as stated below, based solely on its review of such forms that it
received, or written representations from reporting persons that no Form 5s were
required for such persons, the Company believes that, during fiscal 1995, all
Section 16(a) filing requirements were satisfied on a timely basis. In fiscal
1995, Mr. Dwight filed late one Form 4 reporting one transaction.
LOANS TO MANAGEMENT
Dan Maydan is Co-Chairman of Applied Komatsu Technology, Inc. ("AKT"), a
joint venture 50% owned by the Company and 50% owned by Komatsu Ltd., a Japanese
corporation. Pursuant to the AKT Executive Incentive Stock Purchase Plan, in
fiscal 1994 the Company loaned Dr. Maydan $185,500 to purchase shares of
nonvoting convertible preferred stock of AKT. The terms of the loan call for
interest at the rate of 7.16% to be paid on an annual basis, with a balloon
principal payment to be paid January 31, 2004. Unpaid interest is added to the
principal balance upon which interest is calculated. The loan is secured by the
shares purchased. As of November 1, 1995, the outstanding principal amount of
the loan was $205,209, which was the largest principal amount of such loan
outstanding during fiscal 1995.
ITEM 2 -- AMENDMENT OF THE CERTIFICATE OF
INCORPORATION TO AUTHORIZE ADDITIONAL COMMON STOCK
Article FIFTH of the Certificate of Incorporation presently authorizes the
issuance of up to 200,000,000 shares of Common Stock, par value $.01 per share,
and 1,000,000 shares of Preferred Stock, par value $.01 per share. The
authorized Common Stock is all of a single class and with equal voting,
distribution, liquidation and other rights.
A 100% stock dividend distributed on October 12, 1995 depleted the pool of
authorized but unissued shares of Common Stock by 89,614,721 shares. As of
November 1, 1995, 179,279,936 shares were outstanding and 27,422,568 shares were
reserved for issuance under the Company's various employee benefit plans. The
resulting 206,702,504 shares outstanding or reserved for issuance therefore
exceeds the 200,000,000 shares currently authorized by the Company's Certificate
of Incorporation. In addition, the Board of Directors considers it advisable to
have the ability to issue shares for additional stock dividends (if any), public
offerings
12
<PAGE> 16
(if any) or other corporate purposes. Therefore, the Board deems it to be in the
best interest of the Company to amend Article FIFTH of the Certificate of
Incorporation to authorize the issuance of up to 500,000,000 shares of Common
Stock. If the proposed amendment is approved, the approximate number of
authorized, unissued and unreserved shares will be 293,297,496. Although no such
action is currently being contemplated, this number of authorized, unissued and
unreserved shares would permit the Board of Directors to declare another 100%
stock dividend without necessitating another amendment to the Certificate of
Incorporation.
If this amendment is adopted, the additional shares of Common Stock may be
issued by direction of the Board of Directors at such times, in such amounts and
upon such terms as the Board of Directors may determine, without further
approval of the stockholders unless, in any instance, such approval is expressly
required by regulatory agencies or otherwise. Stockholders of the Company have
no preemptive rights to purchase additional shares. The adoption of the
amendment will not of itself cause any change in the capital accounts of the
Company. However, the issuance of additional shares of Common Stock could dilute
the existing stockholders' equity interest in the Company.
Approval of the proposed amendment requires the affirmative votes of the
holders of a majority of the outstanding Company shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT
OF THE CERTIFICATE OF INCORPORATION.
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<PAGE> 17
(LOGO) This Proxy Statement was printed on recycled paper.
<PAGE> 18
PROXY PROXY
APPLIED MATERIALS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON MARCH 14, 1996.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints James C. Morgan and Donald A. Slichter,
or either of them, each with full power of substitution, as proxies of the
undersigned, to attend the Annual Meeting of Stockholders of Applied Materials,
Inc., to be held on Tuesday, March 14, 1996, at 3:00 p.m. and any adjournment
or postponement thereof, and to vote the number of shares the undersigned would
be entitled to vote if personally present on the following:
(Continued and to be signed on reverse side.)
APPLIED MATERIALS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
[ ]
The Board of Directors recommends a vote FOR each of the listed proposals.
1. ELECTION OF DIRECTORS For All
M. Armacost, J. Bagley, H. Dwight, G. Farnsworth, For Against Except
P. Gerdine, T. Kawaniahi, P. Low, D. Maydan, / / / / / /
J. Morgan, A. Stein
INSTRUCTION: To withhold authority to vote for any individual Nominee, write
that Nominee's name in the space provided below.
____________________________________________________________________________
____________________________________________________________________________
2. To approve the amendment of the Company's Certificate For Against Abstain
of Incorporation to increase the number of shares of / / / / / /
Common Stock authorized for issuance thereunder to
500,000,000.
3. In their discretion, upon any and all such other For Against Abstain
matters as may properly come before the meeting or / / / / / /
any adjournment or postponement thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED, WILL BE
VOTED FOR THE TEN NOMINEES FOR ELECTION AND FOR PROPOSAL 2. (Please sign
exactly as your name appears. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.)
Dated: ___________________________________________, 1996
________________________________________________________
Signature
STOCKHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
